Executives
Amin Khoury - Co-Founder, Executive Chairman and Chief Executive Officer
Greg Powell - Vice President of Investor Relations
T. McCaffrey - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treausrer
W. Lieberherr - President and Chief Operating Officer
Analysts
J. B. Groh - D.A. Davidson & Co.
Gautam Khanna - Cowen and Company, LLC
Amit Mehrotra - Deutsche Bank AG
Eric Hugel - Stephens Inc.
Howard Rubel - Jefferies & Company, Inc.
Robert Spingarn - Crédit Suisse AG
Noah Poponak - Goldman Sachs Group Inc.
Rama Bondada - RBC Capital Markets, LLC
David Strauss - UBS Investment Bank
Peter Arment - Gleacher & Company, Inc.
BE Aerospace (BEAV) Q1 2011 Earnings Call April 25, 2011 9:00 AM ET
Operator
Good morning. My name is Jessica Morgan, and I'll be your conference facilitator today. At this time, I'd like to welcome everyone to the B/E Aerospace First Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, the conference is being recorded this day, April 25, 2011. Thank you. I would now like to introduce B/E Aerospace's Vice President of Investor Relations, Greg Powell. Mr. Powell, you may begin your conference.
Greg Powell
Thank you, Jessica. Good morning, and thank you for joining us this morning. Today, we are here to discuss our financial result for the first quarter ended March 31, 2011. By now, you should have received a copy of the news release we issued earlier this morning. If you haven't received it, a copy is available on our website.
We will begin this morning with remarks from Amin Khoury, our Founder, Chairman and Chief Executive Officer, and then we will take your questions.
For today’s call, we've prepared a few slides to help you follow along our discussion. You can find the presentation on our Investor Relations page at beaerospace.com. In addition, copies of the slides will be posted on our website for you to refer to after the call.
Joining us this morning are Werner Lieberherr, President and Chief Operating Officer; and Tom McCaffrey, Senior Vice President and Chief Financial Officer. As always in our prepared remarks and our responses to your questions, we rely on the Safe Harbor exemptions under the various securities acts and our Safe Harbor statements in the company's filings with the SEC.
We will address questions following our prepared remarks. At that time, the operator will provide instructions. [Operator Instructions]
Now I will turn the call over to Mr. Amin Khoury, our Chairman and CEO.
Amin Khoury
Thank you, Greg, and good morning, everyone. We are very pleased with the results, which we announced earlier this morning. Our financial results were well above earlier expectations. Essentially, all of the important financial metrics, which we reported this morning, were at near-record levels, which is quite a feat, particularly given the difficult global conditions encountered during the period.
Our first quarter results included revenues up 30%, record quarterly bookings up 48%, operating earnings up 39% and earnings per share up 44%. The record bookings performance was driven by strong orders for a broad range of aircraft interior equipment for both new-buy and aftermarket retrofit program and a double-digit growth rate in consumables orders. 30% revenue growth was driven by 35% revenue growth for the Commercial Aircraft segment, 24% growth for the Consumables Management segment. The 120-basis-point expansion in operating margin was driven by significant margin improvement in both the Commercial Aircraft and Business Jet segments and the better-than-expected margin performance for our Consumables Management segment, which reported only a 50 basis points decline in spite of the margin drag from the Satair acquisition.
Based on our record backlog, both booked and awarded but unbooked, of approximately $6 billion, our expectation for continued growth in passenger travel and attendant increases in capacity and on our exportation of high levels of wide-body aircraft deliveries in 2011, today, we raised our full year 2011 guidance to approximately $2 per diluted share.
Today, I'd like to spend a few minutes discussing the current market environment. In addition, we'll provide an update on the recent Hamburg, Germany Aircraft Interiors Exposition, which was our most successful expo ever. And we will discuss our results for the quarter, and lastly, we will review our current financial guidance for 2011.
Now let's briefly discuss the current market environment. The economic recovery is gaining momentum. The IMS recently updated its world economic outlook and is still forecasting a healthy 2011 global GDP growth rate and for GDP growth to remain healthy in 2012, despite the tragic Japanese earthquakes and upward pressures on commodity prices.
February year-to-date global airline revenue growth approximately 5.5% year-to-date. International traffic was up 7.3% for the first 2 months of the year. And importantly, premium international traffic also continues to rise and was up 7.9% for the first 2 months of the year.
The rising price of oil is something that our customers are watching very closely. And to date, the airlines have responded rationally by carefully managing capacity and passing on cost increases in an orderly fashion. U.S. airlines have successfully implemented 8 fare increases so far this year, more or less offsetting the higher cost of fuel. Clearly, however, the environment has changed; unrest in the Middle East, tragedies in Japan and rising oil prices are problematic. Nevertheless, we remain optimistic because the airlines are well prepared, have managed capacity growth and successfully raised fares and fees. And importantly, higher fuel costs does drive demand for more efficient new aircraft. Finally, global traffic did increase by a healthy 4.5% in February with premium traffic much stronger.
Earlier this month, Werner and I, as well as a large group of our sales engineers, product specialists and region managers, attended the 2011 Aircraft Interiors Expo in Hamburg, Germany. This year's expo was an unqualified success for our company. The quality of our meetings with high-level airline executives was the best that we have ever experienced. During the expo, we met with senior delegations from over 50 airlines. With those airlines, we reviewed active programs in excess of $2.3 billion. This is on top of the more than $500 million of contract awards, which we booked in the first quarter of 2011. At the expo itself, we were awarded $100 million of new business from 3 different customers.
We clearly have separated ourselves from our competitors in the eyes of the airlines and OEMs with our display platform and systems integration. Additionally, our strategic commitment to SFE systems innovation is truly appreciated by both Airbus and Boeing and positions us well for continued backlog growth. It was clear to all constituents that B/E Aerospace continues to be the leader in the aircraft interior space.
The Aircraft Interiors Expo is a tremendous platform for us to market our innovations and gives B/E Aerospace significant advantages that are crucial, growing our backlog and revenue. This year, we debuted our experience center, which was a dynamic and powerful tool for engaging senior airline and OEM executives with our integrated innovations for galley and galley insert products. This was a great success, drawing senior executives into substantive and highly positive strategic discussions. In addition, we displayed many of our recent product innovations, including our next-generation lighting system, Super First Class platforms, oxygen systems, business and coach class seating platforms and consumables capabilities. In summary, we expect continued solid order growth arising from our successful efforts at the expo.
Now let's turn to Slide 2 and discuss our first quarter financial results. I'm pleased to report that all 3 of our operating segments performed strongly during the quarter. The bar chart on Slide 2 reflects our first quarter 2011 financial performance compared to the first quarter of 2010. Revenues increased 30% to $600 million. Operating earnings of $100 million increased 39%. Operating margin expanded 120 basis points to 16.7%. Earnings per share of $0.49 increased 44%. Free cash flow of $50 million represents a free cash flow conversion ratio of 100% of net earnings.
Let's review Slide 3, which summarizes our current bookings and backlog status. First quarter bookings of approximately $756 million were a record for any quarter and were approximately 48% higher than the same period of the prior year. First quarter orders included double-digit increases for both Commercial Aircraft segment spares and consumables.
First quarter was a record bookings quarter for our seating group, surpassing its prior record set in the fourth quarter of 2010. Our seating group is forecasting a full year booking record, and its top sales campaigns are split 50-50 between retrofit programs and new-buy programs. The book-to-bill ratio was 1.26:1 for the quarter. Backlog at the end of the quarter was in excess of $3.2 billion, an increase of approximately 19% as compared with the company's March 31, 2010, backlog, and supplier furnished equipment awards expanded to $2.8 billion. As a result, total backlog, both booked and awarded but unbooked, expanded to a record $6 billion, an increase of almost 13% as compared with March 31, 2010.
Now I will briefly review the first quarter operating performance for each of our business segments. Let's turn to Slide 4 and review the first quarter results for our Commercial Aircraft segment. The Commercial Aircraft segment leadership team did an excellent job during the quarter. In addition, it's important to note that, currently, B/E Aerospace is the only seating supplier with the Boeing Gold status. And in addition, we were recently rewarded the Airbus Best Seat Supplier Award.
For our Commercial Aircraft segment, revenues of $310.3 million increased about 34.9% as compared to the same period of the prior year. Operating earnings of $49.3 million increased 45.9%. And operating margin of 15.9% expanded 120 basis points, primarily due to an improved revenue mix and ongoing operational efficiency initiatives. Margin expansion was also aided by double-digit increase in spare sales.
Let's turn to Slide 5 and review first quarter results for our Consumables Management segment. The leadership team for the CMS segment also delivered a double-digit increase in both sales and orders and continued to drive effective efficiency initiatives. Our Consumables Management segment reported revenues of $230.8 million, which reflected an increase of 24%. Operating earnings were $44.6 million and increased by 21.2%, and the operating margin of 19.3% was 50 basis points lower than the prior year due to the margin drag from the Satair acquisition. We also had strong double-digit increase in bookings for this business.
Let's turn to Slide 6 and review the first quarter results for our Business Jet segment. The Business Jet segment team also delivered very good results for the quarter, beginning what is expected to be a very significant improvement in full year 2011 results and continuing for the next several years. So the Business Jet segment reported revenues of $59.1 million, which increased by $11.8 million or 24.9%. Operating earnings of $6.2 million increased by $4.8 million or 343%. And the current period operating margin of 10.5% improved by 750 basis points, reflecting both the increase in revenues and an improved mix of revenues.
Let's briefly review our financial position on Slide 7. First quarter free cash flow was a solid $50.5 million and represents the free cash flow conversion ratio of 100%. As of March 31, 2011, cash was $121 million, $120.8 million; net debt, which represents total debt of $1.246 billion less cash, was $1.21 billion; and the company's net-debt-to-net-capital ratio was 40%. As of March 31, 2011, we had no borrowings outstanding on our $750 million revolving credit facility, and we have no debt maturities until July 2018.
Let's now briefly review our full year outlook. In spite of a number of challenges, the global economy and global passenger traffic do continue to recover. Our airline customers have responded rationally to rising oil prices by carefully managing capacity and passing on cost increases in an orderly fashion. U.S. airlines have successfully implemented approximately 8 fare increases so far this year, more or less offsetting the higher cost of fuel. Order rates for spares and consumables continue to grow at double-digit rates. In addition, due to record wide-body backlogs at the major OEMs, wide-body aircraft deliveries are expected to increase approximately 25% in 2011 as compared to 2010 and continue to catalyze our retrofit activity. These factors, together with our solid first quarter 2011 financial performance, form the basis for the increase in our financial guidance, which we announced today.
Now let's go to Slide 8 and review the specifics of the guidance. The company expect orders and backlog to continue to grow in 2011. Specifically, the company expects increasing aftermarket demand for Consumables and Commercial Aircraft segment spares, driven by the continuing growth in passenger traffic and capacity.
The company also expects an increase in orders arising from the expected acceleration in deliveries of new wide-body aircraft beginning in 2011. Strong orders for both Commercial Aircraft segment spares and consumables in the first quarter of 2011 are sufficiently encouraging that the company is increasing full year 2011 earnings per diluted share guidance by $0.05 per share to approximately $2 per diluted share.
The 2011 free cash flow conversion ratio is expected to be approximately 100%. And free cash flow in the second half of 2011 is expected to be stronger than the first half of the year, due to the expected timing of CapEx.
With that, I'll now turn the call back over to Greg Powell.
Greg Powell
[Operator Instructions] And now I will turn it back over to Jessica, who will explain the instructions on how to ask a question.
Question-and-Answer Session
Operator
Thank you, Mr. Powell. [Operator Instructions]. And our first question today comes from Robert Spingarn with Crédit Suisse.
Robert Spingarn - Crédit Suisse AG
Amin, having been out at the Hamburg show, I certainly saw the high level of activity from the customers myself. You mentioned that the seating group's projecting a record bookings year. You had an excellent book-to-bill here in the first quarter. The Hamburg show bookings will go into the second quarter. How should we think about book-to-bill ratio for the rest of this year?
Amin Khoury
The Hamburg show bookings, that is $100 million that we actually booked on the stands, will likely go into the second quarter. But we expect bookings coming out of the Hamburg show over the next 12 to 18 months to be very strong. I mean, we had excellent conversations with 50 -- with delegations from 50 major airlines. So we're expecting, without quantitating it, for both bookings and backlog, bookings to continue to be higher than 1 and backlog to continue to grow and to position us well for solid growth in 2012.
Robert Spingarn - Crédit Suisse AG
Okay, and then just 2 questions on the free cash flow guidance, and again, these may be for you, may be for Tom, but you talked about conversion improving in the back end of the year. Can you color that with regard to an expectation for some higher inventory in the Consumables group? Is the CapEx simply shifting into 2012? So perhaps I'm asking you to think about free cash flow from this year into next. And then the second question is, the guidance implies about $50 million in free cash per quarter. You've already done that in Q1. So a year-end balance is something like $280 million in cash. Will you pay down some debt? Or are more acquisitions likely? Thank you.
Amin Khoury
Well, the balance would be about $320 million in cash. I mean, it was $120 million here at the end of the quarter. I am going to ask Tom to answer the question. But our hope is that we will be successful in finding excellent bolt-on transactions to strengthen our businesses strategically and that we'll will be able to use some of that excess free cash flow to grow the business externally. But having said that, I'm going to ask Tom to give you some guidance on cash flow, CapEx and the growth of working capital over the course of this year or next year. We have said in the past that working capital is going to grow at about the same rate as revenues, and it really depends on the revenue growth rate next year. But I don't see anything that should lead us to believe, at this point, that the free cash flow conversion ratio is going to be significantly less than 100% in 2012. But Tom, would you like to answer the question?
T. McCaffrey
Sure. Rob, I think that the way to think about it is our guidance for the year is for 100% free cash flow conversion. It was $50 million or 100% in the first quarter. The timing of CapEx is stronger in the first half, meaning that the second quarter is going to have a large increase. And so it will impact the second quarter, and our guidance for the year remains the same. So it's just the lumpiness of CapEx.
Robert Spingarn - Crédit Suisse AG
Tom, what is that CapEx for this quarter?
T. McCaffrey
Part of it has to do with -- a big chunk of it has to do with the facilities which we are completing to build the A350 galleys.
Robert Spingarn - Crédit Suisse AG
I see. And so I shouldn't make the mistake of thinking that when you mentioned timing on CapEx, it's not that any CapEx is shifting into '12?
T. McCaffrey
No, no, no. It's just...
Amin Khoury
No, no. On the contrary, we're doing more of it now so that the cash flow, free cash flow, may be stronger in the second half of this year...
Robert Spingarn - Crédit Suisse AG
Got it.
Amin Khoury
As compared to the first half of this year.
Robert Spingarn - Crédit Suisse AG
Got it. Okay. I thought maybe it meant that it was shifting out of Q4 into Q1 next year, so that's clear.
Amin Khoury
No, we're expecting to spend $85 million to $90 million this year and about the same next year.
Robert Spingarn - Crédit Suisse AG
Okay, thanks for clarifying.
Amin Khoury
And the reason that CapEx is stepped-up is because we've got all these SFE programs that we're now getting ready to deliver. So it's the A350 galleys, then it's the waste water treatment systems. And we've actually already begun delivering 737 lighting. So there is a lot of stuff going on having to do with fulfilling our obligations under the $6 billion backlog.
Robert Spingarn - Crédit Suisse AG
And Tom, you're not -- Tom, you're planning any debt retirement this year?
T. McCaffrey
No. I mean, we have our bonds outstanding, which are due in 2018 and 2020, respectively, and no bank debt outstanding under our $750 million revolver.
Robert Spingarn - Crédit Suisse AG
Okay, thank you. Thank you both.
Operator
And we'll take our next question from Peter Arment with Gleacher & Company.
Peter Arment - Gleacher & Company, Inc.
Amin, a question, I guess, on R&D. At this quarter, it looks like it was a record on up from an absolute dollar basis. But as a percentage of sales, it's still, I don't know, 150 basis points or so below what you used to spend back in '06 and '07. How do we think about R&D going forward, either on an absolute dollar level or as a percentage of sales? And, obviously, it reflects a lot of the investments you're making, but maybe some color there? Thank you.
T. McCaffrey
Sure.
Amin Khoury
Sure. Tom, I would like you to talk about R&D as a percentage of revenues. Also cover SG&A and the tax rate at the same time.
T. McCaffrey
Sure. Well, Peter, R&D for the quarter was 6.2% of sales, which was up from 5.8% of sales in the first quarter of 2010. It's about a $10 million increase in spending. It’s primarily related to new product development activities in our Commercial Aircraft segment, which has a record backlog and that has been growing. And the expectation for the full year 2011 is for R&D to be about 6% of sales, and that's what's going to be required to support the backlog, both booked and unbooked. In terms of SG&A, for the quarter, SG&A was $85 million or 14.2% of sales, and that compares with 14.8% of sales in the first quarter last year. The higher level of SG&A is primarily related to the acquisitions that we completed at the end of last year and other costs and expenses associated with the almost 30% increase in revenues. In terms of the expectation for the full year 2011, you should expect SG&A to be somewhat lower than the 14.2% that we had in the first quarter. And with respect to the tax rate, the tax rate in the second quarter was 32%, slightly lower than what we expect for the entire year. That was just a function of tax planning initiatives and geographic mix.
Peter Arment - Gleacher & Company, Inc.
Okay. Tom, on the R&D though, is it tied to -- I mean, you're supporting all these new programs and some of these new investments. But will we see some of that roll off as we get to 2012 or is it just that -- because of the wide-body ramp that we're seeing that, that this is going to be a new sustained level?
T. McCaffrey
Peter, we don't have guidance out for 2012, but we do have a $6 billion book and unbooked backlog. And there’s an awful lot of activity, which is going on right now related to those programs and other initiatives the company has underway.
Peter Arment - Gleacher & Company, Inc.
Okay, and then a quick follow-up. Amin, you've had a lot of nice and recent announcements from both Europe and Asia. Could you maybe just give us an update on what you're seeing from the North American majors? Thank you.
Amin Khoury
I think -- I'd be happy to have Werner answer this question. But all of the North American customers are pretty active right now. But Werner, without specifically mentioning orders, why don't you talk a little bit about activities at the major domestic airlines? And there was a lot of activity going on, both retrofit and new-buy activity, and U.S. airlines were, in fact, in attendance at the show. Do you want to talk a little bit about it, Werner?
W. Lieberherr
Yes, definitely. No, I would like to confirm what you just said. I think the U.S. airlines are very instrumental actually in these activities. And going forward, we see the same level of activity. So when we look into the markets, we see strong activity in the Middle East, Europe and the U.S. going forward.
Amin Khoury
I think that there's a lot more money being spent in Asia and in Europe by the majors and in the Mid East. I mean Qatar, Emirates and Etihad are just -- they're just buying more airplanes than any of the domestic carriers. And Lufthansa and Air France also are placing orders for a lot of new aircraft. United, Continental are buying a lot of new aircraft. But aside from that, the new aircraft purchases are somewhat smaller. You’ve got the 737 purchases at American, and then eventually, the 787. And I think all of you know what's going on at U.S. Air and at Delta. So there's a lot more going on in terms of both new and retrofit in the Mid East and Europe, but there's a lot of activity in the U.S. as well. It's particularly retrofit activity.
Operator
And we'll take a question now from UBS and David Strauss.
David Strauss - UBS Investment Bank
Amin or Tom, were there any AIT costs, any acquisition-related costs in the quarter? I think, last quarter, you had about $9 million in AIT expenses.
Amin Khoury
We do have integration expenses in various places, but I mean, nothing that we would break out or talk about. It's just part of our cost.
David Strauss - UBS Investment Bank
Okay. And could you -- you talked about double-digit growth in Consumables order rate. Can you kind of break that out, give some color what you're seeing in your overnight business versus your contract business, what kind -- how the growth rates compare in those 2 components of the business?
Amin Khoury
Both are expanding as we speak. Aside from our Biz Jet customers -- I mean, Biz Jet customer business is still down very quiet. But as for the rest of our business, it seems to be coming back, both the overnight business and also the support of manufacturers, aside from the business jet manufacturers. And it's across the board. It's in all regions of the world, and it's in our entire customer base.
David Strauss - UBS Investment Bank
And on the spares side in the Commercial Aircraft business, you talked about double-digit growth in sales. What about the order rate on the spares side? Is that -- I know that came back a while ago. Is that, at this point, is that still double-digit growth or is it decelerating?
Amin Khoury
Yes. We had a double-digit growth rate in both orders and sales in the CAS Spares business. And something else that I know is near and dear to your heart, I tried to make a point today of pointing out that of the programs that we are working on and trying to get booked on the seating side, more than half are retrofit programs. There is a lot going on right now.
David Strauss - UBS Investment Bank
Okay. And last one, last one for me, on the guidance, in the first quarter, you did $0.49. Your guidance implies very little sequential growth in earnings from here. Is there anything unusual that's supposed to come through Q2 through Q4, just because if you look at your progression in typical years, earnings tend to accelerate sequentially from the first quarter?
Amin Khoury
No, there's nothing there, and we're only 1 quarter through the year. And as the year rolls out and we have a little more visibility, we'll perhaps be a little braver than we are right now. But for the time being, I think we'd like to maintain a conservative guidance. And we'll talk about -- we'll continue to talk about the full year at the end of each quarter. And hopefully, we'll be able to improve our guidance a little bit later in the year, but we're not prepared to do that right now.
Operator
We'll move now to Myles Walton and Deutsche Bank.
Amit Mehrotra - Deutsche Bank AG
This is for Amit Mehrotra here for Myles Walton. Just a couple quick questions, if I may. Can you provide us with the revenue growth and margin for the Consumables segment, excluding Satair?
Amin Khoury
Revenue growth and -- yes, the revenue growth, excluding Satair, for the Consumables segment was a little over 9%, okay? And the -- what was the other question you asked?
Amit Mehrotra - Deutsche Bank AG
The margin, excluding Satair?
Amin Khoury
I don't know what the margin was excluding Satair, and we wouldn't break out the margin, excluding Satair.
Amit Mehrotra - Deutsche Bank AG
Okay. Could you just say if it was at least up year-over-year or up sequentially?
Amin Khoury
Well, margins have improved in that business pretty much every year for the past 10 years. So there's nothing going on that's different. So, actually, what has happened was the business turned in a pretty darn good quarter because the margin was only 50 basis points lower and included a full quarter of the drag from Satair, which has a 14% margin.
Amit Mehrotra - Deutsche Bank AG
Okay. And just looking forward, how should we think about the margin progression? Should it expand from the 1Q levels, and then looking out for the full year, should we expect it, including Satair, to be up year-over-year?
Amin Khoury
No, we don't give guidance by business, margin guidance by business, and we haven't done that publicly, and I certainly couldn't do it on the call. But over a period of time, we had given the following guidance. We said that we expect our margins in the Consumables business to continue to improve as they have for the last several years. I think over the last 3 years, margin's up another 400 basis points since July of 2008, right? So we expect the margin to improve, but during this year, we're going to have to suffer the drag from the Satair transaction, and over time, we expect to get margins in our Satair business up to be comparable with the margin in the rest of our business, the rest of our Consumables business. And that is really important to us, obviously, because the Consumables business has the highest-margin business we have, and it has a disproportionate impact on corporate margin. So we expect the company's overall margin to continue to expand, which we've been doing for years now. We expect part of what's driving that margin expansion to come from Consumables, whose margins are expected to expand. And we expect the Satair margin to improve and to become comparable to the rest of the CMS margin over a period of time. Now I don't mean that, that's likely to happen in the second quarter or the third quarter, but over a period of time. So you can expect continued margin expansion in the CMS business and for the company over the next couple of years.
Amit Mehrotra - Deutsche Bank AG
Great. Thanks. That's helpful. Just my last question on the order rates. Book-to-bill of almost 1.3, appears to be strongest it's been since the fourth quarter of 2007. Can you just describe, given that Hamburg was in the second quarter, what the order activity cadence was through the quarter? Did you see significant amount of order activity in the beginning of the quarter and taper off? Was it vice versa, or was it strong throughout the quarter?
Amin Khoury
No, it was strong throughout the quarter. And I did mention on the call that we are trying to handle about $2.3 billion worth of active programs that we're trying to get booked with approximately 50 major clients or customers at the current time. We are absolutely inundated. And surprisingly, really surprisingly, about half the business on the seating side is retrofit business. It's very, very active. We're all incredibly busy. I don't know. Werner, do you want to add a little color?
W. Lieberherr
Yes, I just want to say that, I mean, yes, we saw it pretty strong throughout the quarters. In term of these larger programs, it's just a little bit of timing, so whether it comes few weeks earlier than later. So it's hard to say, okay, was it strong at the beginning or end. But in summary, it was a very strong quarter, as Amin outlined. And we are especially also very pleased to see actually the retrofit activity, which is very active.
Amit Mehrotra - Deutsche Bank AG
Great. That's great. Thank you very much.
Operator
We'll take a question now from Howard Rubel with Jefferies.
Howard Rubel - Jefferies & Company, Inc.
Thank you very much. Tom, did you change your payment terms with your suppliers?
T. McCaffrey
No.
Howard Rubel - Jefferies & Company, Inc.
You were able to grow your liabilities essentially in line or your payables essentially in line with inventories and receivables. It just struck me that, that was pretty good management. Was there anything there that caused this match?
T. McCaffrey
Should I take credit for that, Howard?
Howard Rubel - Jefferies & Company, Inc.
You could give it to Amin, if you'd prefer, or Werner.
T. McCaffrey
Well, I think Amin did a good job with that. No, I mean, it’s just running the business.
Amin Khoury
I can tell you, Howard, I had absolutely nothing to do with it.
T. McCaffrey
It's just the timing of receipts and when invoices are due.
Operator
We'll take our next question from Gautam Khanna with Cowen and Company.
Gautam Khanna - Cowen and Company, LLC
Yes, a couple of them, please. The CAS segment margins are already quite near prior peak. And given the strong visibility you have there, given the backlog, where do you think margins can go this cycle at CAS? Then I have a couple of follow-ups.
Amin Khoury
Well, I think, Gautam, that we have -- we've guided to marginal increases in the margins over time, smaller, smaller increases in the CAS margins over time. What we're doing really well, basically, what's driving the margin improvement is the continuous improvement initiatives, which continue to drive our costs lower. And when I say our cost, I mean our cost of quality and our cost of materials, our low-cost country sourcing, our scrap, our yield, our labor productivity. So it's smaller. We expect smaller increases in margin but continuing increases in margin, year-over-year. So that's kind of how we think about our CAS business. Consumables has a lot more room to run. It's got a lot more room to run because we've got CAS drag on the Consumables business right now. And even the HCS business is not where we would like it to be in terms of margins. We're not 100% of the way as to where we're trying to go here. So there's a lot more upside in the Consumables business and in the Business Jet segment than there is in the Commercial Aircraft segment. Is that helpful for you?
Gautam Khanna - Cowen and Company, LLC
It is. I just wondered, I mean, you had incremental margins of roughly 19%. That's a little bit lower than the last several quarters but still very strong. I mean, do you think that incremental drop-through is going to fade over time? Or do you think that's sort of the right level? I understand the -- go ahead, sir.
Amin Khoury
Yes, without commenting specifically on the incremental margin because it has to do with which parts of the business had revenue growth in the period, right? Without commenting on the incrementals, I would say that you should expect Commercial Aircraft segment margins to continue to improve. It is a major initiative and focus of the company, of Werner and of Sean and of the entire team to continue to drive margins in that business.
Gautam Khanna - Cowen and Company, LLC
Thanks, and I have 2 more. Just one, I'd wanted to ask at the CMS segment, if you've seen any trend in numbers of orders per day or average value of orders, et cetera, that suggest to you that airlines are restocking inventories or just buying what they're consuming? I mean, do you think there is any evidence…
Amin Khoury
No, we haven't seen order size increase substantially. And as far as we can tell, there doesn't appear to be a restocking, at least not a significant restocking going on. There might be a customer here or there that is starting to place larger orders at some of the MROs now. But it's, for the most part, it's basically, the order sizes are about what they were, and the customer base is doing a reasonably good job of managing their inventory. So we're not yet at that inflection point where things take off and people start to order in larger quantities and build stocks.
Gautam Khanna - Cowen and Company, LLC
And what is your visibility at the MROs? I mean, do think that we're going to see schedules improve year-on-year as we go move through the year, MRO activity?
Amin Khoury
I would guess so. This is not really informed judgment here, but I would guess so because the way the airlines have handled this growth is to leave -- it's to defer maintenance, leave the older or used aircraft part, fly the newer airplanes almost into the ground, which have the lower cost -- the lowest cost of flying, right? And then as they need more lift, they bring airplanes back grudgingly. But loads are still very high, as you know. And so my guess is that to the extent that revenue passenger miles continue to grow here, that they will be bringing more older airplanes back in, and they will have a higher need -- more of a need for service.
Gautam Khanna - Cowen and Company, LLC
Okay and lastly, just a general one, could you share your perspectives or the company's perspective, I should say, on Boeing Commercial's move to aggregate the demand of its Tier 1 and 2 suppliers and source fasteners direct from the OEMs? Thanks.
Amin Khoury
Yes, I'm happy to comment on that. First, I want to say that this is not a B/E Aerospace issue. It is a Wesco-specific issue. We view it as an opportunity, and I'll try to explain. The B/E Aerospace Consumables Management business hasn't built its franchise on selling Boeing proprietary fasteners to the Boeing Commercial Aircraft group and its suppliers. So our aggregate revenues from Boeing Commercial Airplane group and its suppliers related to the BCAG proprietary fasteners is less than 4% -- less than 4% or 5% of CMS revenues. It's very small. To understand why this is so, one needs to think a little bit about the history of how we built our business vis-à-vis how Wesco built its business. So our business started as an aftermarket business. And over many years, we aligned ourselves with numerous airlines and MROs and other distributors. And we were very successful in building our franchise as an aftermarket business. We entered the JIT business, which is kind of what you're talking about here, some years ago, but we targeted the Business Jet OEM and the non-Boeing-related manufacturers, and we were also successful in developing this side of the business. One of the reasons that our business was hit so hard here was that the biz jet OEs’ manufacturing activity dropped 50%, and they're all our customers. Most recently, so in the middle of '08, we acquired the HCS business, which provided us access to Honeywell's JIT business, and they had built their franchise much as we had done, that is by serving non-Boeing-related manufacturing customers. In contrast, Wesco has developed its business primarily as a supplier to Boeing and Boeing subcontract manufacturers, as well as the JIT military and defense market. So today, the military market represents about half of Wesco's revenues, I think, 53%. But Boeing and Boeing subcontract manufacturers represent a very large portion of the 47% balance of Wesco's business. So whereas Wesco has risked the Boeing's proposed plan, we, on the other hand, have an opportunity to grow our business with Boeing and its suppliers as a result of Boeing's new initiatives. Is that helpful to you?
Gautam Khanna - Cowen and Company, LLC
It is. Could you just expand on how? I mean, how might you participate in the new regime and then...
Amin Khoury
Well ,we don't know. It depends upon to what extent Boeing wants to add additional suppliers or supplier, right, and how they want to divide the business up. It really is a Boeing initiative, and we don't really know how it will shake out. But for us, we know it will be a positive.
Gautam Khanna - Cowen and Company, LLC
Thank you, appreciated that.
Operator
And we'll return to Howard Rubel with Jefferies for his question.
Howard Rubel - Jefferies & Company, Inc.
Thank you very much. Amin, just a high-level question. You gave us the bottom line, but you didn't give us a revenue forecast. What are some of the variables that you're considering with that factor?
Amin Khoury
Howard, when we gave our guidance to you and to the other analysts, investors at the end of October, we said that we expected about a 20% growth this year, of which 8% would be organic and 12% would be from acquisition. We now believe the organic growth rate is going to be higher, okay? At the end of the second quarter, what we will do is we will revise our revenue guidance for the year. So we're not ready to do it this morning. We are telling you that, obviously, our organic growth rate is going to be higher than we originally guided to and anticipated. But we're not ready to give you a number just yet. We will do so at the end of Q2.
Howard Rubel - Jefferies & Company, Inc.
That's fair. And then just follow up and then I'm done is, all of these orders and sort of this organic growth and sort of when we think about the market would seem to indicate that seating and some of the Commercial Aircraft business has taken share. Can you give us a little color on some share or maybe by geography?
Amin Khoury
We are growing share. Remember, the way share is measured, the way we and our competitors measure share here is what share did we have in the year in which we shipped, right? So if you look at our backlog and as we look forward, it is pretty clear that our share is going to be growing in seating, in all of the food and beverage preparation and storage equipment, can't grow very much in oxygen because we've got it all. It's certainly going to be growing in lighting, and it's going to be growing in the Waste Water Treatment business, so for sure in galleys because we've actually didn't have a business there. So our shares are growing in pretty much every business in which we operate, I would say, with the exception of oxygen where we have -- we are on board every in-production airplane.
Howard Rubel - Jefferies & Company, Inc.
Thank you very much.
Operator
We'll take a question now with Goldman Sachs with Noah Poponak.
Noah Poponak - Goldman Sachs Group Inc.
Amin, just a follow-up on that. One, a little more specifically, at the Investor Day, you were showing us the new vacuum waste management systems and talking about taking share there in the Business Jet side and moving on to trials on some narrow-body aircraft where we could maybe see some orders this year. Can you update us on how those are going?
Amin Khoury
Sure. We've got -- I'm going to ask Werner to jump in and give us some specifics, but we have trials ongoing right now on the 737 with a specific airline. And we have trials set to start on the 747, the 767 and I think the 757. But I'm going to ask Werner to jump in and give us the specifics. And the trial, by the way, is going great. There have been no failures, no problems. And the airline with which we're doing the trial is no longer -- they're no longer treating it as a trial. They're starting to roll it out into their other aircraft. Werner, can you talk about this a little bit?
W. Lieberherr
Yes, I think that you're absolutely right, the way you said it. We are on these platforms. The trials are growing well. And now it's actually a matter of accumulating hours, and we are doing that. And we fully expect actually that we don't experience any major issue, and we'll proceed, which will actually then lead to the orders.
Amin Khoury
Can you talk a little bit about accumulating hours? So what Werner's saying is, before we start getting lots of orders, I think the customers -- in fact, not only the customers, I think Boeing and Airbus, as well as the other airlines are going to want to know how many hours of experience we have on which aircrafts and what the mean time between failures was. So we've got a lot of data to gather. But the data looks like it's really good, and one of the airlines that's doing the trial is already beginning to roll it out to a bunch of additional aircraft in the same aircraft type.
Noah Poponak - Goldman Sachs Group Inc.
Okay. That's interesting and very helpful. Another thing that was discussed at the Investor Day was that you had let an unprofitable customer go in consumables. Can you just give us the numbers on when that annualizes or when it started to come out last year so we can figure out when that stops being a headwind to the organic growth rate there?
Amin Khoury
It was near the end of last year. And I think it's -- I think it accounts for 2% or -- 2% or 3% or something like that, maybe a couple of percent of revenues and...
Noah Poponak - Goldman Sachs Group Inc.
And was it the second half of last year?
Amin Khoury
Yes, probably -- excuse me, probably in somewhere in the third or fourth quarter of this year, it stops being a headwind.
Noah Poponak - Goldman Sachs Group Inc.
Okay and then just...
Amin Khoury
On a relative basis, on a relative basis, right.
Noah Poponak - Goldman Sachs Group Inc.
Right, yes. And then just one last one, I recognize you just said you're going to give us a revenue update, you were -- I just want to try to see if I can get a little more out of you on that. You were previously calling for 8% organic. You did 17% in the first quarter. I just -- maybe if you could just categorize the extent to which you think that kind of organic number can hold or close to hold through the year versus slowing meaningfully, just because you do have tougher comps. But the book-to-bill numbers, the trailing 12-month book to bill, in particular, which is a good indicator for your organic growth rate, would imply your kind of hold right there, and you guys sound fairly bullish on the amount of orders you continue to see through the year.
Amin Khoury
No, this is like going to the dentist, all right, to pull out one more tooth. We promise you that by the end of the second quarter, which is only a couple of months from now, we will give you revenue guidance and organic growth rate guidance for the full year for the company. It's obviously going to be better than we guided to. We’re just not ready to do it this morning. That's all.
Noah Poponak - Goldman Sachs Group Inc.
Okay. Fair enough. Thanks a lot.
Amin Khoury
I mean, we're not avoiding the question. We actually don't have -- we haven't worked on it hard enough to give you an intelligent answer this morning.
Noah Poponak - Goldman Sachs Group Inc.
Right, right. That's fair. Thank you.
Operator
Eric Hugel with Stephens Inc. has our next question
Eric Hugel - Stephens Inc.
Amin, I don't mean to belittle the 9% organic growth rate in the Consumables Business. It was pretty good growth here, but you guys were pretty adamant about hitting double-digit sort of revenue growth on an organic basis in the quarter. Did you guys hit some slowdown later on in the quarter or should we just chalk this up to sort of margin of error. I mean, you're only sort of 1% off the low end of that target.
Amin Khoury
No, during the -- excuse me, don't forget during the quarter, we lost 5 days of shipments in 1 location, there's -- I'm talking about the snowstorms now. We lost 3 days in a second location; we lost 2 days in a third location. In the aggregate, that cost us $2.5 million, $3 million worth of revenues or more than 1% in the growth rate. So we had a lot of issues to deal with during the quarter. I mean, we did not expect that the Japanese tragedies or the snowstorms or all the things that happened to our customer base during the quarter. So, no, I think the business is going fine. The backlog is growing. Orders are growing at a double-digit rate. And I think that we would have certainly met our number had we not run into these unplanned macro events over the course of the quarter.
Eric Hugel - Stephens Inc.
Should we expect to see maybe a bit of a catch-up in the second quarter from these sort of delays, or should we just sort of expect sort of in that 10% to 12% sort of in the second quarter also?
Amin Khoury
I think that we expect our business to continue to evolve as it has been evolving on a quarter-to-quarter basis. We don't see anything dramatic happening in the second or third or fourth quarters but just a continuing evolution of both revenues and the growth rate.
Eric Hugel - Stephens Inc.
Great, and I guess lastly, I mean, you talked about hopefully being able to find some -- deploy some capital in terms of doing some more bolt-on M&As. Can you just sort of talk about what you're seeing out there in terms of sort of richness of targets and multiples?
Amin Khoury
There are some opportunities. We are talking with a couple of folks, but there's nothing that's risen to the point where we have a materiality kind of -- an announcement to make or that we're deeply enough engaged that we need to say something. So there's activity going on, and we can see that there is activity going on. And we may be able to deploy a portion of the free cash flow that we're generating in that way. And it's important because, I mean, in responding to another question, I think it was Rob's question, we'll have several hundred million dollars in cash at the end of the year, and we have no way to use the cash to retire debt since our indebtedness doesn't mature until 2018 and 2020. So we'll have some issues to deal with there as we start to pile up cash if we don't find opportunities which are creative and which build our business strategically, et cetera. And we think about it in that way. And I think that if we -- I think that, that is something that the board will begin to address as cash begins to accumulate. And unless we have really attractive opportunities which create shareholder value, we'll think about maybe giving that cash, some portion of that cash, back to the shareholders.
Eric Hugel - Stephens Inc.
Great. Thanks a lot, Amin.
Operator
We'll hear now from J. B. Groh with D.A. Davidson.
J. B. Groh - D.A. Davidson & Co.
Thanks for taking my call. Just a question on the Business Jet segment, I mean, the increase there, is that -- would you attribute that mostly to Super First Class product?
Amin Khoury
Yes.
J. B. Groh - D.A. Davidson & Co.
Have you -- okay. So you haven't seen any -- no big pickup in traditional business jet?
Amin Khoury
No, no really not -- really, really, almost none. None. Not only not almost none. None.
J. B. Groh - D.A. Davidson & Co.
None. Okay, so that explains a lot. And then just a way to kind of look at the overall potential. When you look, say the wide-body planes that are in backlog between the majors, what percentage of those would you say have had an interior ordered for them? I mean, there's obviously going to be more SFE stuff there, but in terms of the discretionary?
Amin Khoury
I would not -- sorry, J.B., excuse me. I wouldn't actually know how to answer that question. But I think what's important, your focus is on orders and airplanes that have yet to be shipped. With respect to shipments, I mean, our focus there is that wide-body shipments this year are likely be 25% higher, and that drives a lot of demand for our products. It requires us to ship products to get into the on-dock dates for the airplanes and then over the next several years, I think the average shipping rate of wide-body airplanes is like 75% higher than 2010. So really big numbers which will drive pretty significant growth in revenues in our Commercial Aircraft segment, no doubt.
J. B. Groh - D.A. Davidson & Co.
I guess my question is, there is obviously a big lag between when an airline orders a plane and airline orders an interior, right?
Amin Khoury
Yes, usually.
J. B. Groh - D.A. Davidson & Co.
But there's still a lot of potential out there in terms of the backlog that's in the OEM for sure?
Amin Khoury
Yes, for sure.
J. B. Groh - D.A. Davidson & Co.
Okay, good. Okay, thanks a lot for your time.
Operator
And we'll take our final question today from Rama Bondada with The Royal Bank of Canada.
Rama Bondada - RBC Capital Markets, LLC
You gave us the organic growth rate over at Consumables. Can you do the same for the Commercial Aircraft segment, excluding TSI?
Amin Khoury
The organic growth rate of the Commercial Aircraft business?
Rama Bondada - RBC Capital Markets, LLC
Yes, excluding any acquisitions there.
Amin Khoury
Tom?
T. McCaffrey
I don't have it here with me. If you want to call back, we can go through it. I just don't have the data sitting here. It was a question we knew that about Consumables that had been raised before, but it's not the way that we look at the business. We look at the business, what we expect, and we manage to that.
Rama Bondada - RBC Capital Markets, LLC
Okay. And can you give us an update on the integrations of CSI and Satair? I know you guys don't do integration costs, but just on how that's pacing?
Amin Khoury
It's not that we don't do the cost. We do the cost, and we incur the cost. We just don't break them out separately. We're about 3 or 4 months into it now, so it's still early in the process. We haven't found any negative surprise. We haven't found any positive or negative surprises. I mean, we did our due diligence. I think we did it well. And the businesses are doing what expected them to do, and we're doing what has to be done in terms of putting everybody on to our charts of the client [ph] counts and our IT systems and our engineering workstations and so on and so forth and our HR systems. There's a whole lot of stuff going on, our quality system. So there is a lot of stuff going on, and we are incurring cost. But we don't have to move things. By that, I mean move new business from 1 building to another building or consolidate businesses among buildings or anything like that. So, we don't have any really heavy cost that we're incurring, and we don't have much of -- we don't have any heavy risk as a result of moving businesses from 1 location to another. Sorry, I can't be more quantitative, but we literally are not breaking out those costs.
Rama Bondada - RBC Capital Markets, LLC
No, no worries. Sorry. And my last question, on the Biz Jet side, what is the potential impact for you guys if -- with G650 potentially slipping. You had said that large cabin hadn't seen any growth at this point, so I was just curious to see what...
Amin Khoury
We haven't seen any sort of a pickup in the biz jet business. And we don't really anticipate much growth in the business and haven't been depending on much growth in the biz jet portion of the -- in the Business Jet business portion of our Biz Jet segment. So we did make a statement earlier that we expected '11 to be a really good turnaround year for the business, and we do, and we expected that to continue in 2012 and '13. For the next several years, we see the Business Jet business, but it has to do with our backlog. We don't really see much happening as a result of Business Jet delivery growth until, I would say, 2013 at the earliest, maybe a little bit 2012. Now there are a number of new aircraft types that are going to be delivered for the first time in '12 including the 650. But there isn't much in terms of large volumes of shipments, which grow revenues for our business, from business jet manufacturing. We don't see much going on there until 2013.
Rama Bondada - RBC Capital Markets, LLC
Thanks.
Operator
There are no further questions, and this concludes our question-and-answer session. Mr. Powell, I'll turn the conference back to you for closing comments.
Greg Powell
Great. Thank you for joining us this morning, and we look forward to giving you an update on the second quarter in July. Thank you.
Operator
Ladies and gentlemen, this concludes today's B/E Aerospace Conference Call. Thank you for participating. Have a great day.
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